JUDGMENT OF 3. 3. 1982 — CASE 14/81 ALPHA STEEL v COMMISSION

In Case 14/81

THE COURT composed of: J. Mertens de Wilmars, President, G. Bosco, A. Touffait and O. Due (Presidents of Chambers), P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe, T. Koopmans, U. Everling, A. Chloros and F. Grévisse, Judges, Advocate General: G. Reischl Registrar: P. Heim

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the course of the procedure and the submissions and arguments of the parties may be summarized as follows:

I — Facts and procedure

1. The background to the dispute

Bv Decision No 2794/80/ECSC of 31 October 1980 (Official Journal 1980, L 291, p. 1) the Commission established a system of steel production quotas for undertakings in the iron and steel industry.

Article 2 of that decision provides that the Commission is to fix quarterly production quotas for crude steel and for the four groups of rolled products described in the same article and, in more detail, in Annex 1 to the decision.

Article 3 provides that the Commission is to fix quarterly production quotas “for each undertaking” on the basis of the reference production figures of that undertaking as referred to in Article 4, bv application of abatement rates to those reference production figures as referred to in Article 5.

In paragraphs (1) and (2) of Article 4 general rules are laid down for establishing the quarterly reference production figures for both rolled products and crude steel. The provisions read as follows:

“(1) For each month of the relevant quarter, reference shall be made to the same month during the period from July 1977 to June 1980 during which the total production of the four groups of rolled products was the highest. The three months thus chosen, which will not necessarily be consecutive, shall constitute the reference period. (2) The reference production figures shall be the same, for crude steel and for each of the other groups of roiled products, as the production of the corresponding items during the reference period.”

Paragraphs (3), (4) and (5) of Article 4 describe the special circumstances in which the reference production figures and, hence, the quotas, are to be increased. Article 4 (4) provides that the reference production may be adapted in the case of an undertaking which, further to an investment programme duly reported and not the subject of an unfavourable opinion by the Commission, has activated a new plant after 1 July 1980 which brings the total production capacity for the four groups of products to a level exceeding by at least 15o/o the total production capacity available for 1979.

Article 4 (3) provides as follows:

“... if during the period from July 1977 to June 1980, the average rate of utilization of the production facilities of an undertaking was 10 percentage points or more below the average rate of utilization of the same facilities of the other undertakings of the Community, during the years 1977, 1978 and 1979, the Commission shall increase the reference production figures for this undertaking to a level which corresponds to a rate of utilization which lies five percentage points below that average rate in the other undertakings: Provided the undertaking undertook to comply from July 1977 to June 1980 with the delivery programmes established by the Commission, and Provided the programme for this enterprise was fixed taking 1974 as a basis, and Provided that during that year all or part of the undertaking's facilities were not on stream.”

By virtue of Article 14 of the decision an undertaking may, if the restrictions imposed entail exceptional difficulties for it, refer the matter to the Commission. The Commission may then adapt the provisions of the decision.

By Decision No 3381/80/ECSC of 23 December 1980 (Official Journal 1980, L 355, p. 37) the Commission fixed the rates of abatement for the first quarter of 1981.

The Commission fixed the applicant's production quotas for the first quarter of 1981 by an individual decision dated 19 December 1980 communicated to the applicant in a letter received on 5 January 1981.

The quota for items comprised in Group I, namely hot-rolled wide and narrow strip, was fixed, after application of the abatement rate of 27-73% to a reference production of 102993 tonnes, at 74433 tonnes and the quota for crude steel was fixed, after application of the same abatement rate to a reference production of 87500 tonnes, at 63236 tonnes.

The decision also indicated that the reference production had been adjusted in accordance with Article 4 of Decision No 2794/80.

By letter of 19 January 1981, written in English, the applicant submitted a formal reasoned request to the Commission for reexamination and reallocation of the production quotas for the first quarter of 1981.

By a decision of 24 February 1981 rectifying the decision of 19 December 1980, the Commission fixed the reference production before adjustment at 63537 tonnes for Group 1 products and 40153 tonnes for crude steel.

The Commission allowed relief under Article 14.of Decision No 2794/80. The rate of abatement was reduced to zero, so that the quotas are the same as the reference production.

2. The course of the procedure

By an application dated 29 January 1981 and lodged at the Court Registry on the same date the applicant sought the annulment of the individual decision referred to above. Its application is based, pursuant to Article 33 of the ECSC Treaty and the rules of law relating to the application of that Treaty, on breach of essential procedural requirements and misuse of powers.

In its defence, dated 5 March 1981 and lodged at the Court Registry on the following day, the Commission maintained that the decision at issue was annulled and replaced by the Commission's decision of 24 February 1981 which was sent to the applicant on the same day and appears in the annex hereto.

Taking the view that the decision which is the subject of the action had ceased to exist, the Commission contended that there was no need for the case to proceed to judgment and asked the Court to rule on costs at its discretion pursuant to Article 69 (5) of the Rules of Procedure.

In a reply lodged on 9 April 1981 the applicant challenged the Commission's argument that there was no need for the case to proceed to judgment.

In its rejoinder, lodged on 12 May 1981, the Commission maintained the conclusions formulated in the defence but discussed in addition, strictly in the alternative, those of the applicant's submissions which the Commission had not accepted.

The President of the Court granted the applicant's request to be allowed to lodge a reply “on the substance of the case”. That document was lodged on 30 June 1981. At the same time the applicant asked that this case and Case 111/81 be joined.

The Commission, after opposing the application for the cases to be joined, submitted a response to the applicant's reply on 4 August 1981.

On hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court rejected the request for the cases to be joined and decided to open the oral procedure without any preparatory inquiry.

II — Conclusions of the parties

In the application the applicant claims that the Court should:

Declare void the decision dated 19 December 1980 whereby the Commission of the European Communities fixed steel production quotas for the applicant pursuant to Commission Decision No 2794/80/ECSC of 31 October 1980 establishing a system of steel production quotas for undertakings in the iron and steel industry; and

Order the Commission of the European Communities to pay the costs.

In the reply the applicant amended its claims so as to request the Court to declare void the aforesaid decision of 19 December 1980 as amended on 24 February 1981.

The Commission contends that the Court should:

Declare that there is no need for the case to proceed to judgment; and Rule on costs at its discretion pursuant to Article 69 (5) of the Rules of Procedure.

III — Submissions and arguments of the parties

A — Whether the case has ceased to have any purpose

The Commission has informed the Court that the decision at issue was annulled and replaced by the decision of 24 February 1981 and contends therefore that the Court should declare that there is no need for the case to proceed to judgment since the subject-matter of the dispute has ceased to exist.

The applicant challenges the Commission's assertion that the decision of 19 December 1980 has “ceased to exist” so that “there is no need for the case to proceed to judgment”.

Apan from the question whether an authority may, after proceedings have been initiated before the courts, “rectify” its decision — and, moreover, not as requested in the application but in the opposite sense, that is to say by making it less favourable to the applicant — it is in any case not permissible for the authority whose decision is under attack to seek to evade the action by declaring in its rectification that the latter “annuls and replaces” the decision which is the subject-matter of the action.

In fact the only new element in the so-called “new decision” is that it contains a statement of reasons which was wholly absent from the individual decision at issue. The applicant's action has not been deprived of its purpose: obviously it concerns the contested decision as amended. Far from having revoked its decision, the Commission has upheld it as far as the main objections thereto described in the application are concerned.

The Commission expresses surprise that the applicant should contest the annulment of the decision of 19 December 1980, precisely that annulment which it was seeking, for the Commission thereby upheld one of the applicant's grounds for claiming that the decision was unlawful, namely the absence of a statement of reasons or the inaccuracy of the reasons given.

The Commission maintains that the new decision annulled and replaced the previous one. The later decision is a wholly new one which differs from the first not only in the statement of reasons on which it is based but also with regard to the provisions which are applied, the reference production on which it is based and the quotas which are allocated. Thus no single element of the previous decision remains in effect.

The Commission points out that in Case 4/54 Associazione Industrie Siderurgiche Associate (ISA.) v High Authority ([1954-56] ECR 91) and in Joined Cases 5, 7 and 8/60 Meroni and Others v High Authority ([1961] ECR 107) the Court has already held that a decision which is the subject-matter of an application may be declared void and that where the contested decision has been rescinded an action for a declaration that it is void ceases to have any purpose.

Even if the result of the new decision was to allocate quotas lower than those contained in the decision of 19 December 1980 the applicant suffered no damage, according to the Commission, since by 1 March its production figures were only 3359 and 4162 tonnes respectively, and for the whole first quarter of 1981 5593 and 4162 tonnes.

Moreover, the applicant has not chosen to bring an action directed against the new decision within the period prescribed by Article 33 of the Treat).

The Commission therefore reiterates its contention that there is no need for the case to proceed to judgment.

In its reply on the substance of the case the applicant maintains its submission, claiming that the Commission's decisioni may not be supplied with a statement of reasons ex post facto.

B — Substance

First submission: inadequate or contri dictory statement of reasons for thr contested decision.

The applicant claims that the figures given by the Commission at the reference production do not correspond to the actual production figures achiocd during the three-month reference period. The figures have been increased but it is impossible for the applicant to determine itself how the adjustment was made or to obtain information on that question from the Commission.

The applicant is thus quite unable to determine on what basis and on what grounds the quotas were established.

The Commission does not contest that argument.

Second submission: the alleged unlawfulness of Decision No 2794/80/ECSC

(a) Inadequate statement of reasons and infringement of Article 58 (1) and Artide 74 of the ECSC Treaty

The applicant claims that the wording of Article 58 (1) and Article 74 of the Treaty is sufficient to show that any application of Article 58 must necessarily be accompanied by a consideration of “the need for measures provided for in Article 74”, and that that consideration must be followed by a decision either to apply or not to apply Article 74 according to the “need” thus established.

Since there is no mention whatsoever to the effect that such an examination was conducted or of the reasons for the conclusions to which it led, the statement of the reasons for applying Article 58 is inadequate.

Since it was undoubtedly “necessary” to adopt the measures provided for in Article 74, the failure to do so constitutes an infringement of those two anieles. The Commission's exercise of its discretion is subject to review by the Coun.

The Commission contends that although in the case of measures adopted under Article 74 (3) the statement of reasons must indicate that the conditions laid down in Article 58 are satisfied, Article 58 contains no such reference to the existence of the conditions provided for in Article 74 and there was therefore no need to refer to Article 74 in the statement of reasons for Decision No 2794/80/ECSC, which was adopted pursuant to Article 58.

The Commission refers to the measures which it has adopted in relation to imports from nonmember countries, such as antidumping provisions, a system of Community controls and arrangements with a number of nonmember countries.

It is anxious to emphasize that the decision as to the extent to which it is necessary to adopt measures under Article 74 is a question of policy. The soundness of the Commission's choice of policy was demonstrated by a reduction in the level of imports. The complaint directed at the Commission is one which may be raised only in an action for failure to act.

The applicant replies that the Commission may not apply Article 58 without considering the need for measures to be adopted under Article 74: if it failed to consider the point it infringed Article 58; if it did not state in its decision that it had considered that point it failed to fulfil its obligation to state reasons. The obligation to state reasons is interpreted strictly by the Coun precisely because the assessment of the situation is in pan discretionary and thus escapes to some extent judicial review. The obligation exists regardless of whether the decision is to apply the provisions or not to apply them. The explanations supplied by the Commission in its submissions to the Coun ought to have been given as the statement of reasons for the decision.

(b) Infringement of Article 58 (2) of the Treaty

The applicant maintains that the quotas were not established “on an equitable basis, taking account of the principles set out in Articles 2, 3 and 4” of the Treaty, as provided for in Article 58 (2): the provisions contained in Article 4 (3) of Decision No 2794/80/ECSC are discriminatory if they do not apply to undertakings whose voluntary production programmes could not be calculated taking 1974 as a basis because their facilities were of more recent date (the so-called “new” undertakings). Similarly Article 14 creates discrimination between viable undertakings and others. Moreover, the fixing of quotas for such undertakings on the basis of actual production during the reference period rather than on the basis of capacity must inevitably lead to discrimination.

The Commission contends that the basis on which the quotas were established — the reference production for each undertaking — was an equitable one. To that basic system are added the provisions of Article 4 (3), (4) and (5), the last subparagraph of Article 5 (2) and Article 14.

Article 4 (3), which enables the reference production to be adjusted, was introduced in order to avoid any injustice which might be incurred, owing to the adoption of the three-year period in Article 4(1), solely by certain undertakings which had participated in the voluntary delivery programmes and which satisfied certain other conditions.

Since the applicant did not satisfy all the conditions which had been laid down (as was stated in the first paragraph of the preamble to the decision of 24 February 1981), although it had participated in those programmes, there was no reason to allow it an adjustment under Article 4 (3). However, no discrimination was thereby created, either against “new” undertakings or against any other undertaking which did not fulfil the conditions laid down in that paragraph, as there was no different treatment of undertakings which were in similar situations. The treatment differed only inasmuch as the situations of the undertakings differed, and it was therefore wholly justified.

Article 14 enables the disproportionate losses which certain undertakings may have had to suffer as a result of the application of the general provisions of Decision No 2794/80 to be mitigated. The provision is in no way discriminatory since any undertaking experiencing exceptional difficulties may have its quotas adjusted on that ground. If some undertakings do not experience such difficulties but remain “viable” there is no reason to allow them an adjustment under that article; in any case, it must be reiterated that the exclusion of an undertaking from the benefit of that article does not constitute different treatment of similar cases, but different treatment of different cases.

The Commission does not share the view that it is discriminatory to base calculations on actual production rather than production capacity.

Actual production is an objective, precise and measurable criterion, whereas capacity is a less specific concept and its application as the criterion, in preference to actual production, might give rise to injustice.

Furthermore, to calculate the quotas on the basis of the capacity of the undertakings would inevitably penalize those who have a very high rate of utilization as a result of efficient management and would confer an unfair advantage on those with a low rate of utilization.

Article 4 (3) seeks to rectify an injustice whereby a disadvantage would have been suffered by undertakings which, having agreed to take part in voluntary programmes restricting deliveries based on deliveries in 1974, had not yet that year brought their new plant into operation.

“New” undertakings, such as the applicant, which are not covered by Article 4 (3) may, however, take advantage of other provisions of Decision No 2794/80/ECSC which are also designed to ensure equal treatment, such as Article 14. The applicant's problem was different to that envisaged by Article 4 (3), namely a utilization rate so low that it created exceptional difficulties for it within the meaning of Article 14. The decision of 24 February 1981 recognized that circumstance.

The applicant replies that the quota system requires undertakings to sacrifice some of their production capacity. Such a sacrifice must be shared on an equitable basis by using existing production capacity as a reference.

The Commission's argument that capacity is a vague concept which would give rise to considerable difficulty in application does not bear scrutiny.

The Commission itself resorted to that concept for its own programmes, for instance the quarterly estimated programmes, and for the application of the system of voluntary reduction programmes to undertakings which were not producing in 1974. Production capacity should not prove more difficult to ascertain than actual production.

Moreover, it was not the undertakings with modern plant and efficient management which were exploiting their capacity to the full but those with outmoded, labour-intensive plant and the benefit of government subsidies. Those undertakings, held out as good examples by the Commission, were in reality responsible for the deteriorating conditions in the steel industry.

The applicant complains that the reference system creates injustices, the most patent of which is the penalization of undertakings having a very low rate of utilization of their capacity.

Article 4 (3) could have corrected the injustice but three conditions were inserted into it the sole aim of which was to confer an advantage on certain undertakings for which the provision was “tailor-made”.

Taken as a whole, the conditions reveal a particularly serious lacuna in the case of undertakings which had progressively introduced new plant after 1974 but before 1 July 1978 and which, moreover, as a result of that, had a smaller period of reference and found themselves deprived of the possibility of choosing the month in which production was highest.

(c) Infringement of the fourth and fifth paragraphs of Article 14 of the ECSC Treaty and of the general principle of Uw relating to the misuse of powers

The applicant objects to the fact that relief under Article 4 (3) is tied to the undertaking's participation in a voluntary programme to reduce production. The result is to confer ex post facto a binding character on measures which were not binding and could not be so, thus offending against the principle nulla poena sine lege.

The Commission replies that confining the benefit of Article 4 (3) to certain undertakings which are the victims of an injustice does not amount to a sanction applied against other undertakings. Since there was no sanction there was no breach of the principle nulla poena sine lege. The Commission is unable to see how the provision in question infringes the fourth and fifth paragraphs of Article 14 of the ECSC Treaty.

The applicant replies that the breach lies in having conferred a binding character on measures which were not binding. Contrary to the rule that opinions are not binding and that measures involving a legal obligation must be adopted in a particular form, the Commission transformed, ex post facto, into binding decisions acts which were not binding, namely the unfavourable opinion (Article 4 (4) of Decision No 2794/80) and the delivery programme (Article 4 (3)).

The principle that legitimate expectations must be protected has been breached. Undertakings cannot expect the

administration to impose subsequently penalties for failure to comply with a set of rules which were represented as having no binding effect.

Third submission: the contested decision is null and void for infringement of Decision No 2794/80/ECSC, in particular Article 4 (3) and Article 14 thereof The applicant maintains that Article 4 (3) imposes two contradictor)' and incompatible conditions. If the paragraph is to have any meaning, the delivery programme for the period between July 1977 and June 1980 in the case of undertakings whose plant was not, or was only partially, in operation must be considered to have been fixed on the basis of the general situation in that sector of the industry in 1974. The Commission had no grounds therefore for refusing to apply Article 4 (3).

The Commission points out that in drawing up the voluntary delivery programmes taking 1974 as a basis it had regard, for all undertakings, to deliveries during that year, and not to the undertakings' capacity or production. In any case the applicant did not participate in the delivery programmes from July 1977 to June 1980, but did so only from the third quarter of 1978. As a result the condition referred to in the first indent of Article 4 (3) was not fulfilled and the paragraph could not in any case apply.

The applicant replies that the conditions in question are unlawful and discriminatory and that the Commission must apply paragraph (3) without requiring the conditions to be fulfilled.

As far as Article 14 is concerned, the applicant claims that on the basis of Article 58, which requires the quotas to be established on an equitable basis, Article 14 could not be applied, in the case of undertakings with recently installed plant which were not yet established on the market, on the basis of actual production: production capacity must be taken as the sole criterion.

The Commission contends that for the applicant and other undenakings it took account of the rate of utilization of the undenaking's capacity in assessing the exceptional difficulties to which it might have been subject. However, the purpose of Decision No 2794/80/ECSC was to restrict production in order to adapt it to the fall in demand, and therefore the adjustments allowed for in Article 14 of the decision could not, as a matter of principle, result in quotas in excess of the undenakings' previous production, and that principle was respected in the decision of 24 February 1981.

The applicant submits that the application of Article 4 (3) may well lead to the fixing of quotas higher than previous actual production.

The same ought to apply in the case of undenakings entitled to relief under Article 14 if it so happens that they experience “exceptional difficulties”.

IV — Oral procedure

The applicant, represented by André Elvinger, and the Commission, represented by Michel van Ackere, presented oral argument at the sitting on 15 September 1981.

The Advocate General delivered his opinion at the sitting on 29 October 1981.

Decision

1. By application lodged at the Coun Registry on 29 January 1981 Alpha Steel Ltd, a company incorporated under English law, brought an action under the second paragraph of Article 33 of the ECSC Treaty for a declaration that the Commission's individual decision of 19 December 1980 fixing the applicant's production quotas for the first quarter of 1981 pursuant to Commission Decision No 2794/80/ECSC of 31 October 1980 establishing a system of steel production quotas (Official Journal 1980, L 291, p. 1) is void.

2. Decision No 2794/80/ECSC, the general decision, provides in Article 4 (1) and (2) that the quotas are to be determined by application of an abatement rate, fixed for all steel undertakings within the Community, to the reference production calculated for each undertaking in the manner laid down by that decision. The reference production may, however, be increased in certain circumstances when the conditions laid down in Article 4 (3), (4) and (5) are satisfied.

3. The individual decision of 19 December 1980 gave certain figures as the reference production and indicated that the figures had been adjusted pursuant to Article 4 without stating that the provision in question was Article 4 (3), as became apparent subsequently.

4. By another individual decision, dated 24 February 1981, that is to say, after these proceedings had been commenced, the Commission withdrew the contested decision claiming that it had been in error in applying Article 4(3) to the applicant's case with the result that the reference production had been fixed at too high a level. In the new decision the reference production is fixed at a level which is not disputed by the applicant. It grants the applicant relief under Article 14 of the general decision which permits each undertaking's quotas to be adjusted if it appears that the restrictions on production or delivery entail exceptional difficulties for that undertaking. In fixing the production quotas, therefore, the Commission did not apply the rate of abatement to the reference production, with the result that the quota is equal to that production. The quotas fixed in that way are nevertheless lower than those fixed in the decision of 19 December 1980.

5. Originally the application was directed against the decision of 19 December 1980, and sought the annulment of that decision on three grounds, the of which was that the figures given by the Commission as the reference production did not correspond to the real production figures. They had bern increased, but it was impossible for the applicant to determine in what way the adjustment had been effected.

6. After the Commission had adopted its decision of 24 February 1981 the applicant added a supplement to its reply, amending its conclusions to request that the decision of 19 December 1980 as amended on 24 February 1981 be annulled. The applicant abandoned the first ground of its application based on the inaccuracy of the figures given in the decision of 19 December 1980.

Whether the case need proceed to judgment

7. The Commission maintains in limine that the individual decision of 19 December 1980 was “annulled” and not merely amended by the individual decision of 24 February 1981. Since the applicant has failed to lodge a fresh application directed against the latter decision the Commission is of the opinion that the case need not proceed to judgment.

8. That submission cannot be accepted. The decision of 24 February 1981 which replaced, while this action was in progress, a previous decision having the same subject-matter, namely the fixing of a quota for the same period, must be regarded as a new factor which allows the applicant to amend its pleadings. It would not be in the interests of the due administration of justice and the requirements of procedural economy to oblige the applicant to make a fresh application to the Court. Moreover, it would be inequitable if the Commission were able, in order to counter criticisms of a decision contained in an application to the Court, to amend the contested decision or to substitute another for it and to rely in the proceedings on such an amendment or substitution in order to deprive the other party of the opportunity of extending his original pleadings to the later decision or of submitting supplementary pleadings directed against that decision.

Substance

The submission directed against the new decision of 24 February 1981

9. Relying on the administrative law of certain Member States the applicant maintains, first, that the Commission may not withdraw a decision which is the subject of. an action or, at the very least, may not replace such a decision with another decision even more detrimental to the interests of the applicant.

10. The Court has held, in its judgments of 12 July 1957 (Joined Cases 7/56 and 3 to 7/57 Algera and Others [1957-58] ECR 39, at p. 56), 12 July 1962 (Case 14/61 Hoogovens [1962] ECR 253, at p. 272) and 13 July 1965 (Case 111/63 Lemmerz-Werke [1965] ECR 677, at p. 690), that the withdrawal of an unlawful measure is permissible, provided that the withdrawal occurs within a reasonable time and provided that the Commission has had sufficient regard to how far the applicant might have been led to rely on the lawfulness of the measure.

11. In this case the applicant cannot be said to have relied upon the lawfulness of the decision, since it lodged an application for its annulment. It was also aware that the Commission considered that the applicant was not entitled to relief under the provisions of Article 4 (3) of Decision No 2794/80/ECSC, for in its pleadings it refers to correspondence exchanged on that point between itself and the Commission, which it knew to be in error.

12. The delay on the part of the Commission in rectifying the mistake may be attributed, at least in part, to the fact that it had to process information concerning a large number of undertakings. The applicant has not shown in what manner it was adversely affected by the time which was allowed to elapse before 24 February 1981. In the light of all the above circumstances it would 3opear that the decision of 19 December 1980 was withdrawn within a reasonable time. This submission must therefore be rejected.

Second submission : Decision No 2794/80/ECSC is unhwful

13. It follows from the above considerations that the claim that the decision withdrawn was unlawful must be regarded as also being directed against the decision of 24 February 1981.

(a) Inadequate statement of reasons and infringement of Article 58 (1) and Article 74 of the ECSC Treaty

14. The applicant's submission that the decisions are unlawful is based, first, on the argument that the Commission ought to have considered whether it was necessary to take action in the field of commercial policy under Article 74 of the ECSC Treaty when it was examining the possibility of introducing a quota system. It is argued that a reference to its consideration of this point ought to have been included in the preamble to its decision and that the absence thereof amounts to a failure to fulfil the obligation to state reasons. Furthermore, there was, according to the applicant, undeniably a need for measures to be adopted in the field of imports and the failure to adopt them when production quotas were introduced is said to constitute an infringement of Articles 58 and 74 of the ECSC Treaty.

15. Under the terms of Article 58 of the ECSC Treaty the Commission has power to take “to the necessary extent” the measures provided for in Article 74 at the same time as any measure taken on the basis of Article 58. The appraisal of the necessity of taking such measures is a matter for the Commission, subject to the Court's power to review the lawfulness of the Commission's exercise of its discretion.

16. In this connection it must be emphasized that the applicant has not adduced any evidence in support of its submission that the Commission misused its discretion. On the contrary, even before the introduction of the quota system, the Commission took steps to control the level of prices and the quantity of imports of steel products from nonmember countries. In particular, it fixed basic prices, concluded arrangements with nonmember countries and took supervisory action. At the time of the adoption of Decision No 2794/80/ECSC it further intensified that supervision and reviewed the basic prices. Moreover, according to the figures supplied by the Commission the level of imports fell between 1977 and 1979 and that tendency continued before and after the introduction of the quota system.

17. Therefore the Commission cannot be accused of not having made sufficient efforts to combat imports from nonmember countries, particularly as it must be borne in mind that in its negotiations with nonmember countries the Commission faces considerable difficulties as a result of the fact that the Community is a net exporter of steel and that it is compelled to ensure the continuance of Community expons at the same time as it must attempt to limit impons into the Community; in the circumstances it had reason to fear that by taking non-negotiated restrictive decisions with regard to nonmember countries it might provoke retaliatory measures on their part which would be detrimental to the general interest.

18. As far as the statement of reasons for Decision No 2794/80/ECSC is concerned, the Commission has a duty to set out, in a concise but clear and relevant manner, the principal issues of law and fact upon which the decision is based, so that the reasoning which led the Commission to its decision may be understood (Judgment of 4 July 1963, Case 24/62 Federal Republic of Germany v Commission [1963] ECR 63). However, the Commission is not required to discuss all the objections which might be raised against the decision (Judgment of 20 March 1957, Case 2/56 Geitling v High Authority [1957-58] ECR 3). Nor may it be required to indicate its reasons for not adopting measures other than those contained in the decision, where the adoption of those other measures was a matter for its discretion.

19. It was not, therefore, necessary for the Commission to include in the preamble to its decision a statement to the effect that it had considered the possibility of adopting the measures in Article 74 of the ECSC Treaty. It follows that the submission concerning the infringement of an essential procedural requirement is unfounded.

(b) Infringement of Article 58 (2) of the ECSC Treaty

20. The applicant submits that the general decision is incompatible with Article 58 (2) of the ECSC Treaty, which requires that quotas be established “on an equitable basis”. The decision is contested on three grounds, which must be considered individually.

21. The applicant complains that the reference period used in the general decision runs from July 1977 to June 1980, a fact which places at a disadvantage undertakings which had only just started production during the period in question or whose capacity was only in partial use during that period. In addition, the method of calculation based on actual production is said to confer an advantage on undertakings which have overproduced in the past. It would have been more equitable, according to the applicant, to determine quotas on the basis of the undertakings' production capacity.

22. That submission is unfounded. It should be observed that Article 58 (2) of the Treaty does not restrict the Commission's freedom to choose the basis upon which the quotas may be equitably determined in a given economic situation. It follows from the explanations given during these proceedings that there are no reasonable grounds for denying that the Commission's choice of the criterion based on undertakings' actual production mav constitute an “equitable basis” within the meaning of Article 58 (2). Indeed, that criterion, as adjusted by Article 4 of Decision No 2794/80, constitutes, in the first place, an objective basis of assessment which avoids the uncertainties inherent in determining a factor which is partly conjectural, such as production capacity; secondly, it enables total production to be reduced without altering the positions of the undertakings on the market as between each other.

23. The applicant maintains that it would be reasonable to adjust the respective market positions of undertakings subsidized by the State, with a high rate of utilization, outmoded plant and a large workforce, and other undertakings which strive to be efficient. It is not necessary to rule on the validity of that argument since Article 58 in not designed to compensate for distortions of competition attributable to State subsidies, for which the Commission has other means of action at its disposal.

24. Similarly, the Commission's adoption of the period between July 1977 and June 1980 as the reference period is not open to reproach. The fact that undertakings were allowed to have quotas calculated on the basis of their best performance during that period does not amount to discrimination against undertakings whose recent equipment was not fully in operation in July 1977. If the quotas thus allocated to them give rise to difficulty, such undertakings may submit a request to the Commission for an adjustment pursuant to Article 14 of the general decision. That article was specifically designed to provide relief; its usefulness and value are undeniable and it enables the effects of other provisions of the general decision to be adjusted as and when appropriate.

25. Finally, the applicant directs special criticism at the provisions of Article 4 (3) of Decision No 2794/ECSC; it claims that they were intended to benefit a particular undertaking and that they discriminate against new undertakings whose production programme could not be calculated on the basis of 1974.

26. That claim is unfounded. Different treatment does not amount to discrimination if it is applied to a different situation which provides objective justification for the different treatment.

27. In this instance Article 4 (3) of the general decision was designed to take account of the position of certain undertakings which had been placed at a particular disadvantage owing to their voluntary participation in delivery programmes. The delivery programmes for such undertakings were based on their actual production and did not take into account equipment which was not yet on stream, whereas the delivery programmes of other undertakings whose plant was put into operation later were based on production capacity.

(c) Breach of the principle nulla poena sine lege and the principle of the protection of legitimate expectation

28. The applicant takes exception to the fact that the benefit of Article 4 (3) of the general decision in restricted to undertakings which participated in a voluntary delivery programme. It argues that the effect of that is to confer ex post facto a binding character on measures which were not binding, thereby breaching the principle of nulla poena sine lege and the principle of the protection of legitimate expectation. The applicant has the same objection to make with regard to Article 4 (4), the benefit of which is restricted to undertakings which have not disregarded a negative opinion from the Commission regarding investment.

29. This submission must be rejected. Article 4 (3) of Decision No 2794/80/ECSC is designed to compensate for the disadvantages incurred by the undertakings to which it applies. That in no way constitutes a sanction against other undertakings and the provision may not therefore be considered to be in breach of the principle of nulla poene sine lege.

30. Nor has the Commission offended against the principle of the protection of legitimate expectation. The undertakings which did not participate in voluntary delivery programmes could not reasonably expect to continue to enjoy, after the introduction of a quota system, the competitive advantage which they had had over undertakings which did participate in such programmes.

31. As far as Article 4 (4) of the general decision is concerned, the submission is untenable because the applicant does not claim, and could not claim, that it was entitled to an adjustment of its quota thereunder.

Third submission: the individual decision is null and void because it infringes the general decision, Decision No 2794/80/ECSC

32. The applicant maintains that the Commission ought to have allowed it relief under Article 4 (3) of Decision No 2794/80/ECSC, which requires the undertaking to have participated from July 1977 to June 1980 in the Commission's delivery programmes and the programme for the undertaking to have been fixed with 1974 as a basis. According to the applicant, if that provision is to have any meaning, the delivery programmes for undertakings whose facilities were not, or were only partially, in operation in 1974 must be deemed to have been fixed with that year as a basis because their programmes were established by reference to the general situation in that sector of the industry for that year.

33. If that argument were allowed to stand the result would be, not an interpretation, but a revision of a text which is clear and unambiguous. Even if the argument were accepted, the applicant would not in any case satisfy all the conditions laid down in Article 4 (3), which requires not merely that the undertaking's delivery programme should have been calculated with 1974 as a basis but also that the undertaking should have taken part in the delivery programmes from July 1977 to June 1980; in fact the applicant participated in delivery programmes only from the third quaner of 1978. Consequently the Commission applied the relevant provision correctly when it refused the applicant the adjustment provided for in Article 4 (3) of the general decision.

34. The applicant also considers that the Commission ought to have applied Article 14 of the general decision on the basis of production capacity, rather than actual production, and that it ought to have allowed it a larger quota. In fact by its decision of 24 February 1981 the Commission granted an increase in the quota for the first quarter of 1981. Having regard to the applicant's rate of utilization of its production capacity, it reduced the abatement rate to zero so that the quota was the same as the reference production, but it took the view that the adjustments provided for in Article 14 should not, as a matter of principle, result in quotas in excess of previous production and accordingly it considered that it was unable to increase the applicant's quota any further.

35. From the information supplied by the Commission it appears that the applicant used only a part of its quota for the first quarter of 1981. At the hearing the applicant argued that the quotas allocated would have an influence later on owing to the new system of quotas decided upon by the Commission for the period after June 1981, since the quotas were to be calculated in part on the basis of the quotas allocated under the old system. It therefore had an interest in retaining the right to as high a quota as possible in order to be able to take advantage of any improvement in the state of the market.

36. If in the future the market situation enables the applicant to produce and sell steel products in greater quantities it will be open to it to submit to the Commission a request for an adjustment under the rules in force and it will then be for the Commission to take a decision on that request in the light of all the facts at its disposal, including the applicant's utilization of its production capacity. In the circumstances, and as far as the period at issue is concerned, the Commission's refusal to allow the applicant a larger quota does not adversely affect the applicant.

37. Furthermore, by virtue of Anide 14 of the general decision quotas may be adjusted if the restrictions imposed cause an undertaking exceptional difficulty. In the present instance the fact that the applicant's actual production was very low throughout the period in question indicates thai the difficulties in which the applicant finds itself at present are in no way attributable to the restrictions imposed by the quota system. It must be added that the aim of Article 14 is not to enable undertakings to have their quotas for the future calculated on a fictitious basis.

38. Accordingly, this submission must be rejected.

Costs

39. Article 69 (2) of the Rules of Procedure provides that the unsuccessful party is to be ordered to pay the costs.

40. However, Article 69 (3) provides that the Court may order even a successful party to pay costs which the Court considers that party to have unreasonably caused the opposite party to incur.

41. The Commission conceded that the first of the applicant's submissions was well founded by adopting the individual decision of 24 February 1981 while the proceedings before the Court were in progress.

42. It would appear equitable, therefore, for the Commission to pay that pan of the applicant's costs which might have been avoided if the Commission had given a proper statement of the reasons on which its first decision was based.

On those grounds, THE COURT hereby:

1 Dismisses the application.

2 Orders the Commission to pay one-third of the applicant's costs and, for the remainder, orders the parties to bear their own costs.